Immigrants and Local Labor Markets

In the last half-decade, when local labor demand has dried up, less-skilled Mexican-born immigrants have readily moved to find opportunity. They have been more mobile than low-skill native-born workers, according to
Brian Cadena and
Brian Kovak. In Immigrants Equilibrate Local Labor Markets: Evidence from the Great Recession (NBER Working Paper No. 19272), these authors find that the ready movement by Mexican immigrants reduces the impact of both positive and negative payroll employment changes on the employment outcomes of less-skilled native workers. In cities with substantial Mexican-born populations, this "geographic elasticity" reduced the effect of aggregate demand shocks on low-skilled natives' employment by more than 40 percent between 2006 and 2010. The authors conclude that "migration by Mexican-born immigrants dramatically reduces the geographic variability of labor market outcomes among the entire low-skilled population."

The study confirms a finding from prior research that highly skilled workers move to places with better employment possibilities. For example, of the 97 metropolitan areas the authors studied, those with a 10 percentagepoint larger-than-average decline in employment between 2006 and 2010 saw a 5.3 percentagepoint larger-than-average drop in their population of native men with at least some college education. This is a relatively highly skilled part of the labor force. In contrast, there was no measurable drop in the population of less-skilled native men in these areas. The surprise finding is that less-skilled Mexican-born men were even more responsive to economic shocks than highly-skilled native men. Between 2006 and 2010, in those cities with a 10 percentage point larger-than-average employment decline, the population of Mexican-born men fell by 7.6 percentage points more than average. Most of the movement induced by changing labor demand was associated with migration by Mexicans who had already established themselves in the United States. Some returned to Mexico, others moved to new locations in the United States.

The mobility differences uncovered by this study do not appear to be explained by differences in other characteristics of Mexican-born and native low-skilled workers, such as age, education, family structure, or home ownership. The authors point out that Mexican migrants may be predisposed to move because they have already opted to migrate once, in coming to the United States. Also, they are less likely than natives to receive benefits such as unemployment insurance.

The "geographical elasticity" of immigrant workers implies that a recession or other adverse labor demand shock has a much smaller effect on native low-skilled workers in cities with many low-skilled Mexicans than on those in cities without such immigrants. A large immigrant worker population acts as a kind of shock absorber. That flexibility helps smooth the national allocation of low-skilled workers. It may also contribute to the integration of local and regional labor markets. "The rising share of the Mexican-born among the low-skilled therefore at least partially mitigates concerns that the relative lack of mobility among less skilled workers leads to large disparities in these workers' wages across local labor markets."

--Laurent Belsie

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